Rail shipper groups call STB rate changes unfair

Thursday, January 17, 2013

The American Chemistry Council, Fertilizer Institute and five other chemical and transportation organizations have issued rebuttal comments to the U.S. Surface Transportation Board’s proposed changes outlined in Ex Parte 715, which governs whether or not a rail freight rate is reasonable.
The council said the board is using flawed methods to calculate rates that don’t take into account railroad operating costs; the board’s proposed changes to cross-over traffic calculations, they allege, are unjust.
Ex Parte 715 is part of a coming series of reforms by the STB, which sees reform as a pressing issue this year and as a way to increase exports.
The STB undertook a modification of the rail rate infrastructure on July 25, putting forth a number of modifications to the rules it uses when calculating the legality of a shipper-challenged railroad rate.
There are currently three ways to challenge railroad rates — stand-alone cost (SAC), simplified SAC and three-benchmark. The rule changes involve increasing the rate relief for shippers filing challenges, modifying how some expenses in the case are calculated, and changing the reparations interest rate to the U.S. Prime Rate. But the main issue here is the STB's decision to keep cross-over traffic from the challenges because of a perceived shipper bias.
The ACC and others charge that the STB hasn’t detailed why it’s outlawing cross-over traffic and is being vague about the perceived bias. They also allege that with the cross-over changes, the SAC procedure would actually be biased against shippers; new cross-over rules would violate SAC rules; and the cross-over changes would actually hinder shippers from contesting unfair rates.
“We are concerned that changes proposed in this docket would further constrain shippers in a market that is already devoid of meaningful competition,” ACC’s Thomas Schick said in a statement. “We encourage the STB to broaden the scope of rail competition and
quickly resolve these outstanding issues that have plagued shippers for
too long."
Schick and the rest of the ACC wants the STB to take swift action to ensure that the burden on chemical shippers is reduced. The council has also said it will lobby Congress on this issue.
“It is clear that the only justifiable action for the board to take is to decide on the revenue allocation methodology that most fairly and reasonably allocates revenues to incumbent segments based on incumbent costs, and allows the stand-alone railroad to replicate any segment and access all traffic, including all cross-over traffic, that moves over the replicated segment for inclusion in its SAC presentation,” the parties wrote in their rebuttal to the STB changes. - Jon Ross